There are some hard spots in the soft patch. That’s why stock prices rallied so nicely last week. The DJIA jumped 153 points on Thursday after June’s Chicago purchasing managers index (PMI) came in at 61.1, up from 56.6 in May. The national manufacturing PMI was released Friday morning, helping to boost the DJIA by another 168 points by the end of the day. It rose from 53.5 in May to 55.3 in June. However, the components of the index suggest that supply disruptions were still weighing on manufacturers, as the production index edged up by only 0.5pps to 54.5. The inventories index contributed the most to the overall PMI, rising 5.4pps to 54.1, suggesting that the parts shortage may end soon.
The eurozone’s M-PMI fell to 52.0 in June from 54.6 in May. Germany’s PMI dropped to 54.6, only the second reading below 60.0 since November. The French index slipped to 52.5 last month from 55.0 in May. The UK’s PMI dropped to a 21-month low of 51.3 last month. Compounding the gloom, manufacturing in Italy, Ireland, Spain, and Greece all contracted in June, as their PMIs were below 50. China’s M-PMI was weak again in June, falling to 50.9, the lowest reading since February 2009. However, the production index was still at 53.1. The overall index should rebound in July and August as the Japanese parts shortage problem comes to an end.